Key Upgrades for Investment Properties
Buying a new investment property is a lucrative way to accumulate wealth and create a passive income stream. More than one-third of U.S. households rent their homes, making up roughly 42.9 million Americans, according to industry estimates. A HouseCanary report found that the average rental price for a single-family home in 2022 hit as high as $2,495 per month while the National Association of Realtors (NAR) suggests rent prices will increase a further five percent in 2023.
In a nutshell, if you buy the right investment property, you could set yourself up for a great return on your investment, snagging a piece of the pie from these great rental revenues.
But what do prospective tenants want for their dream rental unit? Whether you’re buying a townhouse in the city, a condominium in the downtown core, or a single-family home in the suburbs, here’s a look at the key features investment property owners ought to prioritize for their new purchase.
Central air conditioning, smart home technology, and modern appliances throughout the home – what are your dealbreakers when you’re shopping for a new home? If you’re a buyer thinking of getting into the investment property game, you’ll have to think like your prospective tenants when handpicking a home that will earn you a stable source of rental income for decades to come.
No one wants to be in a sweltering hot home in the peak of summertime. 92 percent of American renters say no air conditioning was their ultimate dealbreaker stopping them from leasing a property, a National Multifamily Housing Council (NMHC) report found.
The study includes responses from more than 270,000 apartment renters across the U.S. to determine which apartment features and community amenities are most wanted. Investment property buyers, take note: lack of up-to-date HVAC systems topped the list of red flags!
Whether you’re buying a sparkling new home or an existing property you’re making renovations and repairs to, make sure your tenants will have access to great heating and cooling systems to get them through all four seasons. This is even more of a concern if you’re in a part of the country that battles heatwaves and cold snaps.
Major Home Appliances
Another 77 percent of renters would turn away a rental property if it didn’t have major home appliances, namely a washer, dryer, and dishwasher within the home, the NMHC report suggests. NAR data found 69 percent of Americans are willing to pay more for new kitchen appliances too.
Go for new stainless-steel appliances and don’t skimp out on the ones that will make life much easier for your tenants. Provide the in-unit washer and dryer, upgrade to the energy-efficient dishwasher, and invest in the smart technology oven for your tenants. These appliances are not only aesthetically pleasing, leveling up the look of your investment property’s kitchen, but they’ll also save your tenants money on their bills. This is a great selling point that will differentiate you from the competition.
You’ll also save yourself the headache of repairing or replacing shoddy appliances that are on their last legs!
High-Speed Internet Access and At-Home Office Space
Bear in mind that since 2020, the world has shifted to a hybrid work setting. This means more Americans than ever are spending at least a few workdays at home.
The same NMHC study found that 63 percent of Americans would walk away from a rental prospect if the property did not have access to reliable high-speed Internet while another 78 percent wouldn’t rent a home without solid cell reception. That doesn’t mean you need to pay for the property’s telecoms bill, but it means that before you buy your investment property, it’s worth triple-checking that the area has high-quality Internet, cable, and mobile service networks your tenants can choose from.
Remember, they’ll need great connectivity throughout the home whether they’re hopping onto Zoom meetings or streaming their favorite TV show. Don’t get in the way of your amazing rental property by providing a home with poor connectivity.
On top of that, find a property with a layout that can be adapted for home working. That could mean carving out a small den or choosing an open-concept layout.
Home Safety and Security
Everyone wants their home to be a safe haven, so it’s no surprise that renters say security is crucial when searching for their next place to call home. 49 percent of Americans said security was their utmost priority when shopping for a rental, the NMHC report found. These percentages likely increase for people living on their own, the elderly, and families living with young children.
Another poll found 35 percent of renters are most interested in having gated access to their homes and communities, making this one of the most popular offerings they’re looking for. Other common security amenities worth investing in include alarm systems, automatic locking doors, security cameras, and a concierge to screen people walking into the building and accept packages while you’re out during the day.
Invest in smart home technology for improved security and comfort throughout the home, too. A 2021 study found that 47 percent of prospective renters say smart home products increased their interest in a potential apartment. Some of the most valuable smart home features included electronic locks, smoke detectors, thermostats, and lighting.
Great Home Amenities
Wannabe landlords eyeing townhouses, condominiums, and even single-family homes that are part of homeowner’s associations (HOAs) must pay attention to the amenities on offer in their community. 60 percent of renters say great amenities are another dealbreaker on their must-have list!
The NMHC report found 60 percent of renters won’t lease a property without a swimming pool while another 55 percent wouldn’t rent without a fitness center.
The 2022 poll found landlords got it right on this point: they rightfully understood that renters are prioritizing features like an on-site pool and gym, just as much as their need for modern appliances, central air conditioning, and parking.
Before you buy a property and market it to prospective tenants, walk through the building or the neighborhood and meet with the building management or HOA. Ask what’s included in the condominium or HOA fees and check on the condition of the gym, pool, and other shared spaces. If these are top-notch amenities, you’ll be sure to attract a strong pool of rental candidates.
Parking Spaces – Including Guest Parking
If you want your rental property to edge out competitors, get the parking space for your prospective tenants. This is a necessity for renters that may yield you a higher return on investment, according to a 2022 poll that surveyed 1,500 American renters and 136 landlords.
The report found that 48 percent of renters will definitely pay more for nearby guest parking in their rental property – only 25 percent of landlords thought renters would pay a premium for this home feature! For what it’s worth, the NMHC report found 71 percent of renters would walk away from a rental option if it didn’t have residential parking, too.
It makes sense: whether your tenants are hosting a housewarming party or they’re inviting friends over for dinner, they need to know their guests can easily find a parking spot. It is also crucial for renters in suburban areas, where they’ll need residential parking so they can carry groceries and other day-to-day items to and from home.
Flexible Pet Policies
68 percent of U.S. households have a pet in the family, so you’re bound to come across potential renters with a cuddly loved one they’re taking with them for the move.
Make sure you promote your rental as pet-friendly, from allowing pets in your rental property to showing visitors at your open house nearby amenities like dog parks, pet grooming salons, and shops
in the neighborhood. Your home can also be geared towards pets. Both you and your tenants will appreciate features like tile, laminate, vinyl, or sealed hardwood flooring over carpet. These materials will be easier to clean and are scratch resistant.
Home Outdoor Space
Before you make a down payment on your new investment property, make sure your new purchase comes with some outdoor space for your future tenants. This is another green flag most American renters are looking for!
Don’t just fixate on what’s within the four walls of the home – consider whether you have a small patio, balcony, access to a roof
garden, or a fenced yard available for your tenants. Just like they want amenities that boost their wellness, they’re also factoring in whether their potential new home has a spot for them to take a breath of fresh air.
You can up the ante by adding some landscaping and a patio table for pre-dinner drinks or a sunchair for that spot on the balcony that gets the most afternoon light. Create a space that prospective tenants can see themselves living in comfortably! This includes boosting the curb appeal of your home.
Renters are also concerned about noise from their neighbors – even from those within the home, according to the NMHC.
The poll found 91 percent of renters are interested in soundproof walls while another 53 percent wouldn’t lease a home without this feature.
While you’re shopping for an investment property, pay attention to the layout of the home, particularly how close together the bedrooms are and how tightly packed the condominium building or neighborhood is. Take stock of whether the property is facing a noisy street with traffic congestion. These could all be deterrents that turn prospective renters off from your property.
The ideal home is well situated away from traffic and noisy neighbors, giving your renters a quiet space to work from home, unwind during their off-time, and rest at night.